WEEKEND INSIGHTS: O-Zone Alchemy and UN Tax Committee Proposal

This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, Transfer Pricing Report, and Financial Accounting.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.

This week we look at: turning business gain taxation lead into gold, the UN’s committee on digitalization, another IRS reorganization, green incentives, and more. We’ll hear from:

• Blake Christian of Holthouse Carlin & Van Trigt LLP and Joseph B. Darby III of Joseph Darby Law PC on the interaction of opportunity zone guidance and tax code Section 1231
• Jeff VanderWolk of Squire Patton Boggs on the lesser-known UN Committee of Experts on International Cooperation in Tax Matters
• Stuart Bassin of The Bassin Law Firm on the plan for another IRS reorganization
• Dean Zerbe and Rick Lazio of alliantgroup on the now permanent energy efficient building deduction
• Robert Willens on the U.S. Tax Court allowing a taxpayer to disavow the form in which it cast its transaction
• Giuseppe Salamone of VaroTeam on the available Covid-relief programs and how to secure relief funds
• Peter Kurjanowicz and Mi Li of Grant Thornton Canada on interpreting the rare Canadian transfer pricing case
• Shanwu Yuan, Jason Wen, and Abe Zhao of Baker McKenzie on whether to revisit advance pricing arrangements with China’s State Taxation Administration
• Laurence Field of Crowe on the measures affecting companies in the U.K. budget
• Catherine Dahl of Beanworks Solutions Inc. on spotting and preventing accounts payable fraud through digitalization

Traffic moves along Van Brunt Street in the Red Hook neighborhood of the Brooklyn borough of New York. The neighborhood is a designated opportunity zone.

Photographer: Jeenah Moon/Bloomberg

Savvy taxpayers are transforming business gain taxation lead into gold. Their approach is far from “ordinary.” Blake Christian of Holthouse Carlin & Van Trigt LLP and Joseph B. Darby III of Joseph Darby Law PC illustrate how the alchemy works. Read: O-Zone Alchemy: Turning Net 1231 Gains Into Gross 1231 Gains (and Losses)

While the OECD/G20 Inclusive Framework two-pillar project on the tax challenges of digitalization has been underway, the less-known UN Committee of Experts on International Cooperation in Tax Matters has been working on the same issues. Jeff VanderWolk of Squire Patton Boggs examines the UN committee’s proposals. Read: Sideshow: The UN Committee of Experts and Digital Services Taxes

Stuart Bassin of The Bassin Law Firm finds the plan for another IRS reorganization isn’t ready for implementation and says the plan needs substantial development and refinement. Read: Is It Really Time For Another IRS Reorganization?

The Consolidated Appropriations Act of 2021 passed by Congress and signed into law by President Trump on Dec. 27 made the energy efficient building deduction permanent. It’s an action that many have awaited since the incentive’s inception in 2005. Dean Zerbe and Rick Lazio of alliantgroup explain the benefits of the move and how to take advantage of it. Read: The Latest Appropriations Bill Opened a Much Needed ‘Green’ Tax Door

Yes, taxpayers can disavow the form in which they cast their transactions—in certain circumstances. Robert Willens walks through a recent U.S. Tax Court decision where the court let the taxpayer do so—over the objections of the IRS. Read: Tax Court Recasts Transaction at Taxpayer’s Behest

Congress enacted a number of relief programs to help businesses and their employees financially survive the pandemic. Along with the programs has come a great deal of guidance, some of which has been more confusing than helpful. Giuseppe Salamone of VaroTeam outlines what’s available and how to secure relief funds. Read: What Small Businesses Need to Know About 2021 Covid-19 Relief Packages

The Tax Court of Canada issued a transfer pricing decision last year—a rare occurrence in the modern history of Canadian transfer pricing. Peter Kurjanowicz and Mi Li of Grant Thornton Canada analyze the case in a two-part article. Read: ‘AgraCity Ltd. v. The Queen'—Insights From Canada’s Most Recent Transfer Pricing Decision—Part 1 and ‘AgraCity Ltd. v. The Queen'—Insights From Canada’s Most Recent Transfer Pricing Decision—Part 2

The Covid-19 pandemic has disrupted global supply chains. Shanwu Yuan, Jason Wen, and Abe Zhao of Baker McKenzie discuss whether it makes sense for multinational enterprises to revisit advance pricing arrangements with China’s State Taxation Administration. Read: Covid-19 Impact on Chinese Advance Pricing Arrangements

Laurence Field of Crowe discusses the measures affecting companies in the U.K. budget, including a corporation tax rise, and looks ahead to the chancellor’s “tax day” on March 23, when proposed long-term tax reforms will be revealed. Read: Two’s Company—U.K. Corporate Tax Rates to Begin with a “2” for First Time Since 2016

Accounts payable fraud is a silent threat faced by many companies. Catherine Dahl of Beanworks explains how digitalization can spot it and even prevent it. Read: Accounts Payable Fraud: Where To to Spot It, And How to Prevent It

From the Archive

Bloomberg Tax contributors keep finding what works and what doesn’t with the opportunity zone program and sharing their knowledge.

The IRS released Notice 2021-10 on Jan. 19, 2021 to provide relief for qualified opportunity zone deadlines. Libin Zhang of Fried Frank explained how qualified opportunity funds formed in January 2021 or earlier are given a free pass for all of their 2020 and 2021 asset tests and are required to make their first qualifying investments generally only by June 30, 2022.

Foreign investors have little incentive to invest in opportunity zones under the current regulations and guidance. Orla O’Connor and Chelsea Riedel of KPMG LLP outlined how the existing withholding structure deters non-U.S. investors from providing capital to distressed communities.

A company created to buy and rent out newly built condominiums could generate qualified opportunity fund benefits. Alan Lederman of Gunster, Yoakley & Stewart P.A. looked at pre-opportunity zone guidance and case law to explain how.

Beyond Tax

What’s happening outside the world of tax?

Law firms need to focus on diversity and inclusion efforts and not cede that responsibility to their clients’ influence. Debra Pickett, Page2 Communications, asks if the best and brightest of Gen Z women and minority law school grads will choose to work for law firms where they still see almost no one in a position of power who looks like them. Read: Will Top Next-Gen Talent Choose to Practice With Law Firms?

Hundreds of recently formed SPACs are hunting for acquisition targets. These SPACs have raised over $100 billion, which they must deploy in the next 18 to 24 months. Two Freshfields partners explain how distressed businesses could be unconventional, yet good targets, and offer a road map to deals. Read: Distressed Businesses Can Be Good Targets for SPACs

This year holds great potential in the mergers and acquisitions arena as the new administration focuses on the economy and more people are vaccinated against Covid-19. Katten Muchin Rosenman LLP partner Brooks Giles explores some possible drivers of increased M&A activity, including President Biden’s stimulus plan, infrastructure legislation, and an uptick in restructurings. Read: M&A Activity May Heat Up With Stimulus Package, Covid-19 Vaccinations

Nasdaq proposed new rules that would require listed companies to have minimum diverse representation on their boards of directors—or explain why they do not—and provide public disclosures about this to investors and others. The rules are subject to review by the SEC and will undergo a public comment process prior to approval. Attorneys from Willkie Farr & Gallagher explain what companies need to know. Read: Nasdaq Proposed Rules Promote Board Diversity: What Businesses Need to Know

Holland & Knight’s Manfred Gabriel took a different career path on the way to making partner as head of the law firm’s legal support services. He looks at the evolution of data management, solutions, and e-discovery and says his elevation to partnership in a non-traditional role signals the firm’s commitment to set trends and evolve to better serve clients. Read: E-Discovery Expertise Paved a Path to Partnership for This Big Law Attorney

Exclusive Content for Bloomberg Tax Subscribers

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After many attempts over the past few years, the U.S. is finally joining most of the rest of the world in strengthening its laws regarding disclosure of beneficial owners of corporations, limited liability companies, and similar entities.
As a result of veto overrides by the House in late 2020 and the Senate on Jan. 1, 2021, the William M. (MAC) Thornberry National Defense Authorization Act for Fiscal Year 2021 (NDAA) became law. Contained within this massive defense act is the Corporate Transparency Act (CTA) governing the required disclosure of beneficial owners of the types of entities mentioned above. Edward Tanenbaum of Alston & Bird LLP considers the implications.